C Corporation Dissolution: What Happens When You Close Your Business

Closing a business can be a difficult decision, but it's important to know the steps involved in dissolving a C Corporation. Here's what happens when you decide to close your C Corporation:

Board resolution: The first step is for the board of directors to pass a resolution to dissolve the corporation. This resolution should be recorded in the minutes of the board meeting.

File articles of dissolution: The next step is to file articles of dissolution with the state in which the corporation is incorporated. This document officially terminates the corporation's existence.

Notify creditors and shareholders: The corporation must notify all creditors and shareholders of the dissolution. This should be done in writing, and creditors should be given a deadline for filing claims.

Pay outstanding debts: The corporation must pay all outstanding debts and obligations before distributing any remaining assets to shareholders.

Distribute remaining assets: After all debts are paid, any remaining assets should be distributed to shareholders in proportion to their ownership of the corporation.

File final tax returns: The corporation must file its final tax returns with the IRS and state tax authorities. These returns should include all income and deductions through the date of dissolution.

Cancel licenses and permits: The corporation must cancel any licenses and permits that it held with state and local authorities.

Once all of these steps are completed, the corporation is officially dissolved. It's important to note that even after dissolution, the corporation may still be liable for certain obligations, such as taxes or legal claims, for a period of time.

In conclusion, dissolving a C Corporation involves several steps, including passing a board resolution, filing articles of dissolution, notifying creditors and shareholders, paying outstanding debts, distributing remaining assets, filing final tax returns, and canceling licenses and permits. It's important to carefully follow these steps to ensure that the dissolution is completed properly and that all obligations are met.